Hardwoods Distribution Inc. (TSX: HWD) has acquired Rugby Architectural Building Products, combining two hardwood construction products companies and positioning the Canadian buyer for additional acquisitions.
Rugby’s seller, private equity firm Leading Ridge Capital Partners, had acquired the Concord, New Hampshire, company in 2011 and expanded the business with 16 add-on acquisitions. All told, Rugby has completed 17 acquisitions since 2009. The company’s ability to acquire businesses on attractive terms and integrate them successfully, and the fact that its management has identified a “robust pipeline” for future U.S. acquisitions, will help Hardwoods expand through its own acquisition strategy, according to Hardwoods.
Rugby is a wholesaler of non-structural building products to customers that supply the commercial market in the U.S. The company also sells to builders in the industrial, retail, residential and institutional construction markets, with nearly $300 million in annual sales. Rugby has more than 22,000 customers in 48 states. Hardwoods Distribution is retaining David Hughes, Rugby's president, and Drew Dickinson, the chief operating officer, and the company’s 560 employees.
Hardwoods, based in Langley, British Columbia, describes itself as North America's largest distributor of high-grade hardwood lumber, sheet goods, architectural millwork and non-structural architectural grade building products for residential and commercial construction. With the Rugby acquisition, the company has doubled the number of its U.S. branches. It now has 62 distribution centers in North America, plus a sawmill and a kiln drying operation.
Leading Ridge, based in Rockville, Maryland, specializes lower-middle-market companies in distribution, logistics and light manufacturing industries. Rugby sold for $107 million, plus up to $13 million based on future performance.
The Rugby acquisition comes as the residential housing construction appears to be picking up. Privately-owned housing starts in May 2016 in the U.S., at a seasonally adjusted annual rate of 1,164,000, were up 9.5 percent from one year earlier, according to the U.S. Census Bureau.
Among Rugby’s acquisitions under Leading Ridges was Albuquerque Hardwood Lumber Co., supplier of lumber and wood products to commercial and residential builders. Other construction materials deals have included the CenterOak Partners PE firm buying Cascade Windows Inc., a windows manufacturer, from Altamont Capital Partners and Industrial Opportunity Partners investing in Alexandria Moulding Inc., a maker and distributor of wood moldings.
On the sale to Hardwoods, KeyBanc Capital Markets was Rugby’s financial adviser and Holland & Knight was the company’s legal counsel.